| Course | AC450 Advanced Accounting |
|---|---|
| Unit | Unit 2 |
| Paper type | Purchase price allocation |
| Length | About 560 words, 5 pages double-spaced |
| Format | APA 7 student paper |
| School | Purdue University Global |
| Program | BS in Accounting |
| Updated | October 2026 |
Free sample paper for AC450 Unit 2
$7,900,000 Allocated: A Unit 2 Purchase Price Allocation for an 80 Percent Stake in a Glassworks
[Student Name]
Purdue University Global
AC450: Advanced Accounting
Unit 2 Purchase Price Allocation
[Instructor Name]
[Date]
The companies and every figure are composite; the standard and textbooks cited are real.
Schedule 1: Consideration and Fair Value of the Entity
Calder Instruments acquired 80 percent of Brookfield's voting stock on January 1, 2025. It paid $6,200,000 in cash and agreed to an earn-out: a further payment if Brookfield's own earnings clear a stated level over two years. The earn-out's fair value on the acquisition date, $200,000, is part of the consideration and is recorded as a liability. Consideration transferred: $6,400,000. The family's 20 percent, the noncontrolling interest, is valued at $1,500,000, based on recent sales of minority shares. Total fair value of Brookfield: $7,900,000.
Calder also paid $85,000 of legal and valuation fees. These are expensed, not added to the price, because the acquisition standard treats them as payments for services rather than part of the exchange (Financial Accounting Standards Board, n.d.).
Schedule 2: Book Value to Fair Value
Brookfield's book value of net assets is $4,200,000. Fair value differs line by line. Inventory is worth $120,000 more than its carrying amount, land $250,000 more and the building $900,000 more, while equipment is worth $200,000 less, since much of it is older than its depreciation schedule assumed. Two intangibles that Brookfield never recorded, because they were developed internally, are recognized at acquisition: customer relationships with laboratory supply distributors at $1,000,000 and the Brookfield trade name at $400,000. The net adjustment is $2,470,000, and identified net assets total $6,670,000.
Customer relationships and the trade name appear for the first time on the acquisition date because a business combination is the moment an outside buyer pays for them, which gives them a measurable fair value they never had on Brookfield's own books.
Schedule 3: Goodwill in Total and by Owner
Total goodwill is $7,900,000 less $6,670,000, or $1,230,000.
Calder's share: consideration of $6,400,000 less 80 percent of identified net assets, $5,336,000, gives $1,064,000. The family's share: the noncontrolling interest's fair value of $1,500,000 less 20 percent of net assets, $1,334,000, gives $166,000. The two shares sum to $1,230,000. If the family's stake had been valued at Calder's price per point, total goodwill would have been $1,330,000 and the family's share $266,000, which is why the fair value of a minority stake must come from evidence rather than arithmetic.
The split is uneven because Calder paid $80,000 per percentage point while the family's stake is valued at $75,000 per point. The difference is a control premium: Calder bought the power to set dividends, appoint managers and direct strategy, and the family's minority shares carry none of that (Hoyle et al., 2021).
Notes
The earn-out is classified as a liability, so Calder will revalue it every quarter and report any change in its earnings rather than as adjustments to goodwill, unless the change reflects facts that existed at acquisition and arises within the one-year measurement period. Goodwill stays on the books without amortization, subject to an impairment test every year. The trade name is treated as having an indefinite life, while customer relationships will be amortized over eight years and the building's increase over twenty, which will reduce consolidated income from 2025 onward (Christensen et al., 2019).
References
Christensen, T. E., Cottrell, D. M., & Budd, C. S. (2019). Advanced financial accounting (12th ed.). McGraw Hill.
Financial Accounting Standards Board. (n.d.). Accounting Standards Codification Topic 805: Business combinations. FASB.
Hoyle, J. B., Schaefer, T. F., & Doupnik, T. S. (2021). Advanced accounting (14th ed.). McGraw Hill.
AC450 Unit 2 instructions, in plain terms
Unit 2 of AC450 asks you to allocate an acquisition price across the assets acquired and liabilities assumed, and to compute goodwill. Measure consideration first, including contingent consideration at its acquisition-date fair value, and state how acquisition costs are treated. Measure the noncontrolling interest at fair value and give the basis. Set the target's book value beside fair value line by line, explaining each adjustment, and recognize identifiable intangibles the target never recorded. Compute goodwill in total, then by owner, and explain any difference in price per share between the controlling and minority interests. Add notes on how contingent consideration will be remeasured, how goodwill will be tested and how adjustments will be amortized in later periods. Cite the business combinations standard and advanced accounting texts in APA 7.
Inside the AC450 Unit 2 example
The sample's first schedule measures $6,400,000 of consideration, including the $200,000 earn-out recorded as a liability, values the noncontrolling interest at $1,500,000 from minority share sales, and expenses $85,000 of fees under ASC 805. The second schedule adjusts inventory, land, building and equipment and adds customer relationships of $1,000,000 and a trade name of $400,000, reaching $6,670,000. The highlighted sentence explains why unrecorded intangibles appear at acquisition. The third schedule computes $1,230,000 of goodwill, then $1,064,000 for Calder and $166,000 for the family, explaining the $80,000 and $75,000 per-point prices as a control premium, and shows how a per-point valuation would overstate goodwill. Notes cover earn-out remeasurement, impairment testing and amortization lives, citing Christensen and colleagues.
Reading the AC450 Unit 2 grading rubric
AC450 purchase price allocations earn their marks for complete measurement of consideration, correct fair value adjustments and correct goodwill computation. Contingent consideration must be included at fair value and classified. Acquisition costs must be expensed, and graders deduct when they are added to goodwill. The noncontrolling interest should be valued at fair value with a stated basis. Every adjustment should be explained, and identifiable intangibles must be recognized even though the target never recorded them. Goodwill must be computed in total and allocated between owners, with the difference explained. Notes that anticipate later-period effects connect the allocation to the consolidations that follow. Clear schedules and APA 7 citations to the business combinations standard finish the Purdue Global marks for this unit.
AC450 Unit 2 help from the desk
Many Unit 2 allocations leave out the earn-out or add acquisition costs to the price. Others value the noncontrolling interest by multiplying the parent's price per share, ignoring the control premium. Intangibles the target never recorded are missed, inflating goodwill. Equipment worth less than book value is left at book. Goodwill is computed for the parent's share only. Later-period effects go unmentioned. If your problem includes a bargain purchase, assumed contingencies or deferred taxes on the adjustments, our writers can build the schedules from your facts.
Get an AC450 Unit 2 example written to your instructions
Price, any contingent payment, book balances, appraised values and the ownership split: every schedule in a Unit 2 allocation is driven by that list, so it should arrive complete, rubric attached. Goodwill gets split by owner whenever a minority stake exists, and a first custom allocation costs nothing and lands within 24-48h. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.
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AC450 Unit 2 questions, answered
Why are the acquisition costs expensed instead of added to goodwill?
Because ASC 805 treats them as payments for services, not as part of what was exchanged for the business. Lawyers, valuers and bankers are paid whether or not the price is fair, so the 180,000 goes to expense in the period incurred. Costs of issuing debt or shares to fund a deal follow their own rules and are handled separately.
Why is the family's stake worth less per point than the parent paid?
The parent bought control, and control has a price: the power to set dividends, appoint management and direct the glassworks' contracts. A 20 percent block carries none of that, so a buyer would pay less per share for it. The allocation shows 80,000 per point against 75,000, and that gap is why goodwill divides unevenly between the two owners.
What happens when the earn-out estimate changes?
Under ASC 805, contingent consideration classified as a liability is remeasured at fair value each reporting date, and changes go to earnings rather than back to goodwill. The sample records the rise from 200,000 to 260,000 at the end of 2025 as a 60,000 loss and leaves goodwill at 1,230,000. Adjustments inside the measurement period for facts that existed at acquisition are a separate matter.
Where can I find a free AC450 Unit 2 sample paper?
This page holds a complete AC450 Unit 2 purchase price allocation for an 80 percent stake in a composite glassworks, with consideration, fair value adjustments, goodwill by owner, notes and APA 7 references.
How is goodwill split between owners in AC450 Unit 2?
Calder's $6,400,000 less 80 percent of $6,670,000 gives $1,064,000. The family's $1,500,000 less 20 percent gives $166,000. Together they equal the $1,230,000 total.